Capital Budgeting Decision Models

Hire our professional essay experts at Gradehunters.net who are available online 24/7 for an essay paper written to a high standard at an affordable cost.


Order a Similar Paper Order a Different Paper

Purpose of Assignment

The purpose of this assignment is to allow the students to become familiar with and practice the measurement of Net Present Value (NPV), payback, and Weighted Average Cost of Capital (WACC) using Microsoft® Excel®.

Assignment Steps

Resources: Microsoft® Excel®, Capital Budgeting Decision Models Template

Calculate the following problems using Microsoft® Excel®:

  • Calculate the NPV for each project and determine which project should be accepted.
Project A Project B Project C Project D
Inital Outlay (105,000.000) (99,000.00) (110,000.00) (85,000.00)
Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00
Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00
Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00
Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00
Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00
Rate 7% 10% 13% 18%
  • Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
Project D Project E Project F
Cost 205,000.00 179,000.00 110,000.00
Inflow year 1 53,000.00 51,000.00 25,000.00
Inflow year 2 50,000.00 87,000.00 55,000.00
Inflow year 3 48,000.00 41,000.00 21,000.00
Inflow year 4 30,000.00 52,000.00 9,000.00
Inflow year 5 24,000.00 40,000.00 35,000.00
  • Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
Component Balance Sheet Value Market Value Cost of Capital
Debt 5,000,000.00 6,850,000.00 8%
Preferred Stock 4,000,000.00 2,200,00.00 10%
Common Stock 2,000,000.00 5,600,000.00 13%
Writerbay.net

Everyone needs a little help with academic work from time to time. Hire the best essay writing professionals working for us today!

Get a 15% discount for your first order


Order a Similar Paper Order a Different Paper